Trade of the Day: Ford Stock in a Long-Term Bull Market

Advertisement

Ford Motor Company (F) — Despite October being a traditionally slower month for auto sales, Ford reported its sales were up 13.4% for the month thanks to strong sales of Explorers, Focus sedans and Mustangs.

The second largest U.S. automaker also said it now expects record annual sales of 17.4 million new cars and trucks in 2015. This should be helped by the aggressive pricing strategy and advertising campaign for the upcoming “Friends & Neighbors” promotion.

S&P Capital IQ Equity Research forecasts an increase in revenues and earnings this year from Ford’s record number of new products and its highly profitable F-150 pickup trucks, which have received rave reviews from auto experts. Cost-cutting should help offset losses in Europe and other international markets.

Last week, Capital IQ reiterated its “buy” rating on F stock and $19 price target, which is based on a 9.6 multiple of its 2016 EPS estimate of $1.97. Its analysts said they have “favorable expectations” for share repurchases and dividend growth. With a current annual dividend of 60 cents per share, the stock has a forward yield of more than 4%.

Following a double-bottom in 2011 and 2012 under $10, F stock jumped to a high over $18 in both 2013 and 2014.

This year, shares topped in March at $16.74 before a slow retreat to the mid-$14 level this summer. Then, as the market corrected in late August, F stock plunged to a low of $10.44.

In the bounce from that low, shares not only regained their pre-correction levels, but broke from a right triangle in September, smashed through their 50-day moving average, and even held above their 200-day moving average for more than a week. F stock is now in a long-term bull market.

Profit-taking drove shares under the 200-day at about $15 last week, opening a gap from $15.57 to $15.15. If it continues, it could drive the stock under $14, where I recommend placing a buy order.

This is a longer-term trade recommendation, with a target of $19 within nine months. If successful, buyers will achieve a return of more than 35%, plus dividends.

F Stock Chart
Click to Enlarge

Chart Key


Article printed from InvestorPlace Media, https://investorplace.com/2015/11/ford-motor-company-f-trade-of-the-day/.

©2024 InvestorPlace Media, LLC